What Slump? Money in Silver ETFs is Soaring

By Brendan Conway

Silver is supposed to be gold’s more volatile cousin. When it comes to fund flows, though, the two lately look like strangers.

Investors have driven silver ETFs to holdings of nearly 20,000 tons, according to Commerzbank. As the chart below shows, it’s been a very rapid turnaround. Much of the shift has happened just as silver prices soared. The metal is up 17.6% in the six sessions heading into Friday.

The $7.8 billion iShares Silver Trust (SLV), the biggest such ETF, is the net recipient of more than $400 million in investor cash during 2013, more than half of it in the last month.

It’s a night-and-day contrast to SPDR Gold Trust (GLD). The biggest gold ETF has shed nearly three iShares silver ETFs’ worth of money to investor outflows this year, or $20.5 billion. Figures are from XTF.com.

Leveraged bets on silver are predictably near the top of the heap for ETF returns this quarter. These high-risk propositions include VelocityShares 3X Long Silver ETN (USLV) and ProShares Ultra Silver (AGQ).

Can you tie this departure to investors’ Federal Reserve “taper” trade? Probably. Silver has industrial and high-tech uses that gold does not. While the metal shared the pain from the weakening of the “easy Fed money” view on gold, there’s nothing written in stone.

The ETF moves seem to suggest a hope silver’s differences versus gold are the thing that makes all the difference.

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As exchange-traded funds and other investing vehicles have ballooned in number, the task of figuring out what works well and what doesn’t has only gotten harder. Barrons.com’s Focus on Funds looks under the hood of ETFs, mutual funds and hedge funds for overlooked values, actionable ideas and the latest pitfalls for fund investors.